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20-1207_CLIFTON LARSON ALLEN, LLP_Agenda Report_F10City of San Juan Capistrano Agenda Report TO: Honorable Mayor and Members of the City Council FROM: Benjamin Siegel, City Manager SUBMITTED BY: Ken Al-Imam, Chief Financial Officer DATE: December 7, 2020 SUBJECT: Assignment and Assumption Agreement for City Audit Contract (White Nelson Diehl Evans LLP) RECOMMENDATION: Approve and authorize the City Manager to execute the Assignment and Assumption Agreement that reflects acquisition of the City’s audit firm, White Nelson Diehl Evans LLP by CliftonLarsonAllen LLP. EXECUTIVE SUMMARY: Effective November 1, 2020, the City’s independent audit firm, White Nelson Diehl Evans LLP (WNDE) was acquired by CliftonLarsonAllen LLP (CLA). As a result of this acquisition, staff recommends that the City’s Professional Services Agreement with WNDE be assigned to CLA. DISCUSSION/ANALYSIS: On May 17, 2016, as the result of a competitive bidding process, the City Council selected WNDE to perform audit services for the City. In October, staff was informed that effective November 1, 2020, WNDE would be acquired by CLA. CLA’s acquisition of WNDE constitutes a change in ownership of the City’s audit firm. However, all personnel of WNDE that have been involved in the annual audit of the City will become members of CLA. Accordingly, staff expects that this ownership change will have no impact on how the City’s annual financial statement audit is conducted. The audit for Fiscal Year 2019-20 that is currently in process will be the last annual audit that will be conducted under the existing Professional Services Agreement. In early 2021, staff will publish a request for proposals for professional audit services to ensure that the City continues to receive quality audit services at a competitive price. Currently, the City is paying $49,545 for annual audit services. 12/7/2020 F10 City Council Agenda Report December 7, 2020 Page 2 of 2 FISCAL IMPACT: There is no cost to the City to enter into this Assignment and Assumption Agreement. ENVIRONMENTAL IMPACT: Not applicable. PRIOR CITY COUNCIL REVIEW: On February 20, 2018, the City Council approved the First Amendment to the Professional Services Agreement (Attachment 3) with WNDE to increase the annual cost of the audit by $1,871 to address the expanded scope of reporting required to be made to the State Controller’s Office. On May 17, 2016, the City Council approved a Professional Services Agreement (Attachment 2) with WNDE. COMMISSION/COMMITTEE/BOARD REVIEW AND RECOMMENDATIONS: This item does not go through the Commission/Committee review process. NOTIFICATION: • Nitin Patel, Partner, CliftonLarsonAllen LLP ATTACHMENT: Attachment 1 – Assignment and Assumption Agreement Attachment 2 – Professional Services Agreement Attachment 3 – First Amendment to the Professional Services Agreement 65273.00300\33457519.1 1 CITY OF SAN JUAN CAPISTRANO ASSIGNMENT AND ASSUMPTION AGREEMENT THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (“Assignment”) is made as of the ____ day of December 2020, by and among the City of San Juan Capistrano, a municipal corporation organized and operating under the laws of the State of California with its principal place of business at 32400 Paseo Adelanto, San Juan Capistrano, CA 92675 (“City”), and White Nelson Diehl Evans LLP, a California limited liability partnership with its principal place of business at 2875 Michelle Drive, Suite 300, Irvine, CA 92606 (“Assignor”), and CliftonLarsonAllen LLP, a registered limited liability partnership formed under Chapter 323A of the Minnesota Statutes, as amended from time to time (“Assignee”). City, Assignor, and Assignee are sometimes individually referred to as “Party” and collectively as “Parties” in this Assignment. R E C I T A L S A. WHEREAS, on or about May 17, 2016, the City and Assignor entered into an agreement entitled “Professional Services Agreement,” Agreement No. 16-0517 (as amended, the “Agreement”), under which Assignor agreed to provide to the City professional independent audit services pursuant to the terms of the Agreement; and B. WHEREAS, on or about February 20, 2018, the City and Assignor entered into a First Amendment to the Agreement, which increased the not-to-exceed compensation amount for additional costs associated with Assignor’s preparation of the City’s State Controller’s Report; and C. WHEREAS, on or about October 14, 2020, Assignor notified the City that, effective as of November 1, 2020, the assets of Assignor were being acquired by Assignee but that the services Assignor agreed to provide to the City pursuant to the Agreement would “continue to be provided by the partners, managers and staff from [Assignee’s] Irvine office” (i.e., the offices of Assignor) and that the “transition [would] be seamless as it relates to the services [Assignor is] currently providing to” the City; and D. WHEREAS, effective November 1, 2020, Assignor desires to assign and transfer its ongoing rights, duties and obligations under the Agreement to Assignee (the “Conveyance”), and Assignee desires to accept said assignment and transfer and expressly assume all ongoing rights, duties and obligations of Assignor relating to the Agreement subject to the conditions stated herein. NOW THEREFORE, for good and valuable consideration the receipt and adequacy of which are acknowledged, Assignor and Assignee agree as follows: Section 1. Assignment and Assumption of Agreement. Effective November 1, 2020, Assignor absolutely and unconditionally assigns and transfers to Assignee, its successors and assigns, and Assignee absolutely and unconditionally assumes, all of Assignor’s rights, duties, obligations and liabilities under the Agreement with regard to the provision of professional independent audit services to the City on or after that date. The City does not release Assignor from fully performing all duties and obligations of Assignor under the Agreement through October 31, 2020, and likewise does not release Assignor from any claims the City may have for breach, non-performance, or indemnity that arise out of the Agreement and Assignor’s actions through that same date. ATTACHMENT 1 - Page 1 of 3 65273.00300\33457519.1 2 Section 2. Conditions Precedent. The following are conditions precedent to the City’s consent under this Assignment. The effective date (“Effective Date”) of this Assignment shall be the date all of the conditions precedent have been met to the City’s satisfaction: a. Receipt by the City of the executed original of this Assignment; b. Receipt by the City of evidence of insurance, as required by the City under the Agreement, in the name of Assignee; c. No “Event of Default” shall have occurred and be continuing under the Agreement. Section 3. Knowledge of Agreement. Assignee represents and warrants that Assignee has personal knowledge of all terms and conditions of the Agreement, and further agrees that the City has no obligation or duty to provide any information to Assignee regarding the terms and conditions of the Agreement before the execution of this Assignment. Assignee understands and acknowledges that, except as expressly provided herein, the City has not waived any of its rights or any of the obligations of Assignor under the Agreement. Section 4. Release of Assignor. Upon this Assignment becoming effective, Assignor will be forever relieved and discharged from any obligation under the Agreement to provide professional independent audit services to the City after October 31, 2020 and from any liability to the City arising out of the professional independent audit services that Assignee provides to the City after that same date. Section 5. Consent to Transfer. Subject to the terms hereof, the City hereby consents to the Conveyance of the Agreement as contemplated by this Assignment. Section 6. No Other Changes. Except as expressly provided in this Assignment, the Agreement shall remain unchanged and in full force and effect. Section 7. Headings and Exhibits. The captions and headings of sections and paragraphs in this Assignment are for convenience only and are not to be interpreted as controlling, or affecting the subject matter contained thereunder. All recitals in this Assignment are incorporated and made a part hereof by reference. Section 8. Conflict of Provisions. In the event of a conflict between this Assignment and the terms in Agreement, the terms of this Assignment shall prevail. Section 9. Counterparts. This Assignment may be executed in any number of counterparts each of which shall be deemed an original, but all such counterparts together shall constitute but one agreement. [SIGNATURES ON FOLLOWING PAGE] ATTACHMENT 1 - Page 2 of 3 65273.00300\33457519.1 3 SIGNATURE PAGE FOR ASSIGNMENT AND ASSUMPTION AGREEMENT BETWEEN CITY OF SAN JUAN CAPISTRANO, WHITE NELSON DIEHL EVANS LLP AND CLIFTONLARSONALLEN LLP IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above. CITY CITY OF SAN JUAN CAPISTRANO, A CALIFORNIA MUNICIPAL CORPORATION By: __________________________________ Name: Ben Siegel Title: City Manager ASSIGNOR WHITE NELSON DIEHL EVANS LLP, A CALIFORNIA LIMITED LIABILITY PARTNERSHIP By: ___________________________________ Name: Nitin Patel Title: Partner ASSIGNEE CLIFTONLARSONALLEN LLP, A MINNESOTA LIMITED LIABILITY PARTNERSHIP By: ___________________________________ Name: Chris Rogers Title: Partner ATTEST: By: City Clerk APPROVED AS TO FORM: By: City Attorney ATTACHMENT 1 - Page 3 of 3 ATTACHMENT 2 - Page 1 of 23 ATTACHMENT 2 - Page 2 of 23 ATTACHMENT 2 - Page 3 of 23 ATTACHMENT 2 - Page 4 of 23 ATTACHMENT 2 - Page 5 of 23 ATTACHMENT 2 - Page 6 of 23 ATTACHMENT 2 - Page 7 of 23 ATTACHMENT 2 - Page 8 of 23 ATTACHMENT 2 - Page 9 of 23 ATTACHMENT 2 - Page 10 of 23 ATTACHMENT 2 - Page 11 of 23 ATTACHMENT 2 - Page 12 of 23 ATTACHMENT 2 - Page 13 of 23 ATTACHMENT 2 - Page 14 of 23 ATTACHMENT 2 - Page 15 of 23 ATTACHMENT 2 - Page 16 of 23 ATTACHMENT 2 - Page 17 of 23 ATTACHMENT 2 - Page 18 of 23 ATTACHMENT 2 - Page 19 of 23 ATTACHMENT 2 - Page 20 of 23 ATTACHMENT 2 - Page 21 of 23 ATTACHMENT 2 - Page 22 of 23 ATTACHMENT 2 - Page 23 of 23 ATTACHMENT 3 - Page 1 of 4 ATTACHMENT 3 - Page 2 of 4 ATTACHMENT 3 - Page 3 of 4 ATTACHMENT 3 - Page 4 of 4